EU Holiday Pay Must Consider Commissions

(CN) - The paid vacations of commission-earning European workers must include potential earnings they miss by taking time off, the EU high court ruled Thursday.

European law gives all workers the right to take at least four weeks of vacation annually. And in the EU all vacation is paid, with workers receiving their "normal remuneration" while on leave.

But for a sales consultant at British Gas, taking two weeks off for Christmas meant that he didn't earn commission while he was gone. He then saw smaller paychecks for months afterward since commission payments are processed as the clients pay for their orders - sometimes months after the sale.

So the salesman filed a claim with the employment tribunal for his lost anticipated income. The tribunal then asked the European Court of Justice whether commission-earners could expect payment for potential sales they miss out on while on vacation - in addition to their base salaries - and how to calculate that anticipated drop in pay.

British Gas argued that it had satisfied EU law since the consultant's holiday check included his base pay plus commission he had earned previously. But the Luxembourg-based high court found Thursday that "normal remuneration" cannot translate to being penalized months down the road since that would discourage workers from taking vacation at all.

"As British Gas conceded at the hearing, the worker does not generate any commission during the period of his annual leave," the court wrote. "Consequently, in the period following that of his annual leave the worker is paid only reduced remuneration comprising his basic salary. That adverse financial impact may deter the worker from actually taking that leave, which is all the more likely in a situation such as that in the main proceedings in which commission represents on average over 60 percent of the remuneration received by the worker."

Discouraging employees from taking vacation also runs afoul of the EU working time directive, the court found.

Holiday paychecks must also include seniority and professional-development bonuses, but the court stopped short of telling British Gas how to calculate its consultants' vacation pay.

"It is for the national court or tribunal to assess, in the light of the principles identified in the court's case-law whether, on the basis of an average over a reference period which is considered to be representative, under national law, the methods of calculating the commission payable to a worker achieve the objective pursued by the working time directive," the court concluded.

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